'People Don't Trust the Stock Market Anymore': Street Whispers

Herald the new flash crash, same as the old flash crash.

NEW YORK ( TheStreet) -- Whatever regulators say after today's so-called flash crash, individual investors will keep streaming out of the market as computer trading complicates trading, said Joseph Saluzzi, a co-founder and co-head of equity trading at Themis Trading.

"Every time this happens, it destroys investor confidence even more," he said. "People just don't trust the stock market anymore."

Quotations in nearly 150 stocks on the New York Stock Exchange went through wild swings today as computer-generated high-frequency trades flooded the system. Trading on some of the biggest companies -- including Radio Shack ( RSH), Goodyear Tire & Rubber ( GT) and Dole Foods ( DOLE) -- were among those affected.

The original flash crash occurred in May 2010, when U.S. stocks tumbled, pushing down the benchmark Dow Jones Industrial Average by about 1,000 points, or about 9%. Stocks recovered shortly afterward.

After today's crash, traders quickly pointed the finger at Wall Street powerhouse Knight Capital ( KCG), which took responsibility and blamed a "technology issue" in its market-making unit.

The NYSE said it's reviewing "irregular trading" but the market's circuit breakers kicked in to shut down the volatility.

Shares of Knight were being punished following the fiasco. They plunged 23%.

Despite the assurances that Knight and the NYSE are on top of the mini-flash crash, Saluzzi said the damage is already done, adding that average investors are realizing they have no chance against computer trading in the market's current form.

"This is about the lack of checks and balances and market structure, said Saluzzi, whose firm is based in Chatham, N.J. "High-frequency trading is killing the equity markets and the core of our economy."

Saluzzi doesn't hold out much hope that anything will change.

"They need to bring back real market makers with real liquidity," Saluzzi said of the NYSE. "But you may get some blue-ribbon panel to put out a report in five months, but nothing will get done."